Singapore Airlines posted record net profits for its full year ending 2023 results - "the highest in its 76-year history". This shouldn't be surprising given the effects of inflation over multiple decades and the fact that people tend to be more well-travelled these days, both for leisure and business.
Still, it is a spectacular achievement on all fronts, for both the company and shareholders, considering how air travel had been severely impacted by the pandemic.
Just think about it: Not very long ago, most airlines had been doomed for bankruptcy when COVID-19 brought air travel to a standstill.
People were even mocking at the idea of ordering takeaway cabin food at home, selling SQ-branded merchandise and even "flights-to-nowhere". All these seemingly whimsical initiatives were targeted at keeping customers engaged and satisfying the insatiable demands of wanderlust travelers, but most of all, I think it was meant to generate some cash flow, if any.
Those flights-to-nowhere were subsequently scrapped due to environmental criticisms from the public but that didn't stop SQ from offering customers a unique dining experience aboard the A350 aircraft (on the ground of course).
When the going gets tough, it's not only the bootstrapping start-up companies with the least bargaining power who have to creatively pull ideas out of their asses. Big companies with elephant-sized egos need to do this as well.
When the world surprises the hell out of you and leaves you at the mercy of cash flows, anything and everything goes.
"What doesn't kill you makes you stronger."
Looking back on the last three years, it might be easy to conclude that there is a simple recipe for surviving the pandemic: Just stick around long enough, don't die in the process, and things will get better.
But simply "sticking around" understates the numerous organisational and technical complexities that firms have to go through such as the re-allocation of manpower resources, deciding which planes to put in long term storage and the costs involved in such an operation (both the tangible and opportunity costs), as well as the means to raise sufficient capital to tide a potentially longer than expected winter.
When you are neck-deep in a sticky situation it can sometimes be difficult to see how the longer term picture can potentially play out. Check out these depressing headlines from 2020:
Even ECB President Christine Lagarde in mid 2020 said that the pandemic was probably "past the lowest point" and cautioned that any rebound would be “uneven”, “incomplete” and “transformational” - hinting that some industries such as air travel and entertainment might never recover.
And when the central bank says something, you listen.
Yet even so, very few emerge well from this period of crisis. This is not about hiring competent management to fix operational inefficiencies but the ability to weather a sudden economic shock. Moments like these test the effectiveness of a company's business continuity plan.
Fortunately for Singapore Airlines, it also has a unique political and financial backing, not many firms have this benefit. To some extent, SQ is Singapore and Singapore is SQ.
This leads to another less obvious factor that has contributed to SQ's record profits.
Timing is everything.
Six months was all that stood between SQ and its closest competitor, Cathay Pacific. That window was sufficient to give any well deserving airline a good head start in cannibalising market share along major competing sectors.
If you compare SQ's FY2023 financial performance with the pre-pandemic periods in 2018 and 2019, operating expenses including staff and fuel costs were almost at the same levels, implying that SQ had returned to nearly full operational status.
CX on the other hand struggled with mobilising its fleet and dealing with the stubborn re-opening of Mainland China, one of its major revenue contributing segments.
When life returned to normal, the dislocation in the supply and demand of air tickets, coupled with the tactical re-opening of Singapore borders six months earlier than Hong Kong / China, was probably what gave SQ the additional bump in profits.
Had the Singapore government been slightly slower in its re-opening, we might have missed the boat on capturing tourist arrivals, the perennial fintech festival and numerous MICE events targeting business travelers and conference-goers especially towards the year end.
Of course nothing is permanent.
Supply pressures will eventually abate which should ease demand and bring down air fares. Unless Cathay Pacific screws it up big time, consumers being consumers will always seek out a variety of airlines to choose from. The key is whether SQ can continue to keep costs under control or will it get complacent from here on.
In an interview with Charlie Rose in 2013, Mike Moritz said of Sequoia Capital:
"I think we've -- we've always been afraid of going out of business. ...and so we've worked hard on trying to figure out how we make Sequoia Capital endure. And I think that's been the reason why we've been able to do what we've been able to do. Because we've assumed that tomorrow isn't like yesterday. We can't afford to rest on our laurels. We can't be complacent. We can't assume that yesterday's success translates into tomorrow's good fortune."